Earlier than expected, the Deutsche Bank’s new CEO, John Cryan, delivered his revamp of the beleaguered investment bank.
On his first day on the job in July, the 54-year-old Briton promised a complete overhaul of the bank by the end of October, according to Reuters reports.
On Sunday, he surprised everyone with the speed and size of the shake-up.
But, perhaps, the most important part of the overhaul is the creation of a new pivotal role – a chief regulatory officer.
However, there’s a lot to digest but here’s the three-point nutshell.
- simplifying Deutsche Bank’s management structure, by merging the corporate finance and global transaction units and cutting 10 of the 16 management committees.
- clearing out executives who were close to former chief Anshu Jain, such as securities co-chief Colin Fan and asset management head Michele Faissola.
- giving regulatory and compliance people a bigger say in how the business is run.
- Like any new CEO, Cryan is reshaping the company in his image. He’s not a fan of bureaucracy and slow-motion decisions.
So, there are going to be a lot fewer chin-stroking meetings at the bank and the decision-making power will be concentrated in the hand of fewer people, which should make Deutsche Bank more agile.
And to implement his vision, Cryan needs loyal lieutenants and a clear out of executives associated with the former regime of ex-co CEOs Anshu Jain and Jürgen Fitschen. So out goes Colin Fan, who became co-head of the bank’s securities trading arm in 2012, the same year Jain became co-CEO. He’s replaced by Garth Ritchie who’s currently in charge of equities – the stocks business.
These two shake-ups – client-facing executives and structure – may grab the most attention.
But Cryan putting regulation and compliance front and centre in his business plan is the most important move for the future of Deutsche Bank’s business.
It’s buried right at the end of the long statement but if anything has an impact on the bank’s ability to generate profit going forward, it’s this.
The bank created a new role – chief regulatory officer – and filled it with Sylvie Matherat, the bank’s highly rated chief lobbyist. Matherat, who only joined a year ago, was a former senior official at France’s central bank.
Her job will be to stop legal expenses, fines, litigation, capital rules and reputational damage eating into Deutsche Bank’s profits – a huge task.
She replaces Stephan Leithner, who had to do all the regulatory stuff along with human resources and other operations, which hasn’t worked out well for the bank in the past few years.
Under Jain and Fitschen, the bank was embroiled in all kinds of scandals, from the manipulation of Libor and FX markets to alleged money laundering in Russia. The bank paid out a lot of money in fines and legal fees. Deutsche Bank had also been caught falling asleep at the wheel by the changing regulatory environment.
Requirements for banks to hold higher amounts of capital, made since the 2008 financial crisis, have hit the bank in the pocket. Earlier this month the bank said it expects a third-quarter loss of €6.2 billion ($6.96 billion) on write-downs brought on by tougher rules.
With Matherat now in the heart of the slimmer power base at the core of the bank, Cryan will hope that these drags on the bank’s profits will be eliminated.
Cryan is coming at Deutsche Bank’s balance sheet from two angles. He hopes Ritchie will bring in more revenue and Matherat will cut needless costs.